SARFAESI Action Not Vitiated by Borrower’s Demise: J&K High Court

In a recent judgment, the High Court of Jammu & Kashmir and Ladakh in the case of Mst. Sundri and Ors vs J&K Bank & Anr, [WP (C) No. 780/2024], dated July 9, 2025, clarified that proceedings initiated by a secured creditor under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, remain valid even if commenced after the borrower’s death, provided a statutory demand notice under Section 13(2) was duly served during the borrower’s lifetime, with no requirement to issue a fresh notice to the legal heirs before taking possession of the secured asset.

The dispute arose after Jammu & Kashmir Bank Limited, the secured creditor (the “Bank”), classified the loan account of Abdul Aziz Sofi (the “Borrower”) as a non-performing asset and issued a demand notice under Section 13(2) of the Act. The borrower, however, passed away without discharging the outstanding dues. Thereafter, the Bank initiated proceedings under Section 14 of the Act and filed an application before the Chief Judicial Magistrate, Srinagar, seeking assistance in taking possession of the secured asset. The application was allowed by the Chief Judicial Magistrate by an order dated February 22, 2024.

The legal heirs of the deceased borrower challenged the said order before the High Court, contending that the application under Section 14 had been filed against a dead person and was therefore not maintainable. It was argued that the Bank ought to have issued a fresh demand notice under Section 13(2) to the legal representatives of the deceased borrower, failing which the subsequent action under Section 14 was vitiated in law.

Rejecting these contentions, the Court held that proceedings under Section 14 are not directed against the Borrower personally but are aimed at facilitating the Bank in taking possession of the secured asset through the intervention of the District Magistrate or Chief Metropolitan Magistrate. The Court observed that the statutory requirement under the SARFAESI Act is limited to the issuance of a demand notice under Section 13(2), and once such notice is duly served upon the borrower during their lifetime, the creditor is not obligated to restart the process in the event of the borrower’s demise.

The Court noted that in the present case, the demand notice was validly served during the lifetime of the Borrower and the sixty-day period for repayment had expired without any discharge of the liability. The application under Section 14 was duly accompanied by the requisite affidavit as mandated under the Act, and the Bank had complied with all procedural requirements. The Court further observed that the legal heirs had not demonstrated either a willingness or readiness to discharge the outstanding liability at any point, and even if a fresh notice had been issued to them, there was no indication that they would have complied with it.

In view of the above findings, the writ petition was held to be without merit and accordingly dismissed along with all connected applications. Any interim relief that was subsisting was directed to stand vacated. The Court, however, observed that in the event any One Time Settlement (OTS) scheme was in force, and the petitioners approached the Bank with a fresh application supported by the requisite deposit, the Bank would be required to consider the same in accordance with the applicable terms and conditions.

This ruling reaffirms that enforcement under the SARFAESI Act is asset-centric, allowing creditors to proceed against secured assets regardless of the borrower’s death, provided due process under the Act was followed.